Amazon Tax Move Could Leave Government Searching For a ‘Plan B’
The Government’s plan to require foreign firms to collect GST on goods they ship to New Zealanders from October next year – its so-called “Amazon tax” – is suddenly in genuine trouble. Australia is the canary down this particular coalmine, and right now that canary is looking pretty poorly.
If you listened to New Zealand retailers, you might think this was the last country in the world to close down a loophole under which consumers can buy low-value items from overseas without paying sales tax. It is fair for them to grumble. New Zealand’s $400 tax-free threshold for most goods crossing the border is relatively high by international standards and they have been dealt a bad hand in that regard.
But the solution the New Zealand and Australian governments have come up with to create a level-playing field for local retailers – requiring foreign firms to collect GST on their behalf at the point of sale – is untested. Amazon has decided that rather than go to that trouble, it will instead block Australians from buying products through its main website. Instead, Australians will only be allowed to shop at Amazon Australia, which for years at least looks set to offer only an inferior range of goods at higher prices.
The move by Amazon came largely out-of-the-blue, and it is only possible to guess at its motivation and end game. It may be that Amazon has simply decided it doesn’t have the time, inclination or perhaps the capacity to implement the necessary systems changes to collect GST. It may have made a late call that it is better off stomaching some loss of Australian sales, compensating for that by driving more custom to its local Australian store. Or it may have made a more calculated decision to punish Australia for its new tax policy to try to dissuade other governments around the world from being tempted to follow its lead.
Our expectation is that the Aussie government has acted with all the haughty disdain it normally musters when dealing with furriners. New Zealand thought it would sneak along for the ride.
Certainly, Amazon’s shock move has come very late in the piece, at a time that seems likely to cause the Australian government maximum consternation. Australia’s Amazon tax is due to come in from the end of next month, and the Australian government now has no choice but to tough it out, rather than be forced into a humiliating climbdown. But equally it can’t get off the hook with consumers by claiming Amazon has given it no notice at all of its intentions.
New Zealand has far less clout than Australia when it comes to fighting an international battle with online retailers. Since Amazon has not yet set up shop in New Zealand, it is more vulnerable to Amazon not playing ball with our Amazon tax, which at this stage remains only a proposal due to take effect from October next year.
The New Zealand Government had arguably won just enough grudging support from the public for the tax change to make it politically palatable. But that was based on an assumption that it would only push up the price of foreign goods by 15 per cent. Fragile public support for an Amazon tax could quickly disintegrate, if consumers find out it means they cannot shop at all from Amazon, or from other foreign firms that might follow Amazon’s lead.
National had signalled bipartisan support for the tax change, but finance spokeswoman Amy Adams appears to have wobbled somewhat on that in a search for political advantage. “If you just take the petrol tax increases, the new regional fuel tax, the five-year bright line test and the Amazon tax, then you have Kiwis paying around $2.27 billion more tax over the next four years,” she said in a statement in the wake of the May Budget. “This from a Government who said they would introduce no new taxes in their first term.”
In that Budget, the Government had been assuming that it would raise almost $100 million a year from the tax change once it took full effect, assuming 75 per cent “compliance” from foreign firms. But that level of compliance may now be looking optimistic. It is no coincidence that the New Zealand Government has been planning to introduce an Amazon tax after Australia. The whole point of that was so as to be able to learn from Australia’s experience and avoid any mistakes it made. . . .
Retailers – who probably thought it was “job done” on an Amazon tax – would be well-advised to think again about how they can ensure consumers don’t turn totally against the tax change, should it become a harder sell.
So much for free trade. Our greedy government thinks free trade is fine, as long as the government is able to fleeces NZ tax payers at every turn. If, on the other hand, they are reduced to moaning about the “unfairness” of Amazon they will risk sounding more and more like Donald Trump–which, one imagines, would not be to their refined tastes.
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